Inventory management includes specifying quantities of stocked goods. It is required at different locations within a facility or within many locations of a supply network. The scope of inventory management includes replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods, and demand forecasting. Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment.
Inventory management for a retailer involves seeking to acquire and maintain a proper merchandise assortment, while ordering, shipping, handling, and related costs are kept in check. It also involves systems and processes that identify inventory requirements, set targets, provide replenishment techniques, report actual and projected inventory status, and handle all functions related to the tracking and management of material. Inventory management is a crucial aspect of a retail business since keeping accurate track of the available stock can, for example, prevent lost sales opportunities caused by out of stock items.